Will Recent Telecom Mergers be a Boon to Enterprises?

C. Whelan
C. Whelan

Summary Bullets:

  • Service provider consolidation should be good for business customers as providers compete to develop compelling services.
  • Businesses should proceed with caution if their providers are moving into new service areas.

2011 was a merger-heavy year that also included Windstream’s acquisition of PAETEC, CenturyLink’s purchase of Qwest and Savvis, EarthLink’s purchase of One Communications and Time Warner Cable’s purchase of NaviSite.  While each carrier had its own reasons for making its acquisition – increasing size and footprint, and improving financial conditions were two big drivers – these carriers are all interested in moving upmarket, whether to win mid-size businesses or larger enterprises.  Enhancing business services and building up the customer base to support this transition were key elements behind these transactions.  In many cases, the acquirers were strong in mass market (i.e., residential and very small business) services, a tough market that can have high levels of churn and pricing pressure. Carriers are looking at increased use of mobile devices in the workplace and interest in cloud-based service models as the way to move away from commodity offers to business services, creating a revenue stream with strong growth potential.  Windstream and CenturyLink are both moving from their rural local exchange carrier (LEC) roots to be national communications providers. Their respective acquisitions add business customers and services, including hosting, managed services and cloud service options. Similarly, Time Warner Cable’s NaviSite purchase added advanced services that are in demand from larger businesses. EarthLink acquired New Edge Networks in 2006: In 2010-2011 the carrier “took it up a notch”, making a string of purchases (One Communications, Deltacom and STS Telecom) to expand the reach and depth of its network footprint, and to develop managed IT services for multi-site businesses and distributed enterprises. Continue reading “Will Recent Telecom Mergers be a Boon to Enterprises?”